Key Takeaways:

• Tech’s strong earnings mean that valuations are in normal ranges.  Trailing 10-year performance at 15.4% has been seen many times before.
• Anthropic’s growth faces several serious threats.
• Important updates on federal deficit, the Fed, and labor markets.

Markets have rebounded since our Q2 outlook, led once again by AI-related companies. As equities have pushed higher, investor concerns have shifted from whether to buy the dip to whether it's time to take profits.  We think the answer is “no.”

While valuations have risen, the fundamental drivers behind our highest-conviction investment themes remain intact. Exceptional earnings growth continues to support AI leadership, long-term opportunities in India, gold and bitcoin remain compelling, and today's macro backdrop provides little reason to abandon structural trends in favor of short-term market timing.

Where We See Opportunity

While quarterly market narratives change quickly, our investment framework remains focused on long-term structural trends. Not every investment should be judged over the same time horizon. Some opportunities are tactical and may play out over the next year. Others are structural themes we believe will shape markets over the next decade.

As we enter the third quarter, here's where we continue to see opportunity:

• Maintain exposure to AI. Strong earnings growth continues to support the sector, though investors should become increasingly selective as competition intensifies. We continue to favor companies with durable competitive advantages, including integrated platforms, proprietary data and strong customer ecosystems.
• Consider opportunities in BDCs and alternative asset managers. While concerns around private credit persist, healthy credit fundamentals, resilient default rates and attractive yields continue to support the investment case over the intermediate term.
• Stay constructive on India. We continue to view India's favorable demographics, pro-growth reforms and expanding domestic economy as a compelling long-term opportunity for equity investors.
• Maintain strategic allocations to gold. Gold's investment case extends beyond inflation, supported by rising fiscal pressures and continued demand for hard assets, particularly across Asia.
• View bitcoin as a long-term allocation. While volatility should be expected, we continue to believe bitcoin benefits from many of the same structural fiscal trends that support the long-term case for gold.

Markets will inevitably experience periods of volatility, and leadership within sectors will continue to evolve. But short-term market movements shouldn't distract investors from the longer-term forces driving portfolio returns. As long as earnings continue to support today's market leadership and our long-term investment themes remain intact, we believe investors should stay focused on the structural opportunities shaping the next decade rather than trying to time the next quarter.

To learn more about how our Asset Allocation Committee is building portfolios in the current environment, watch this webinar replay: Mid-Year Outlook: Repositioning for H2.

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